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Proposed Rule to Increase the Minimum Salary for FLSA Exemption

Yesterday, the U.S. Department of Labor (USDOL) announced a Notice of Proposed Rulemaking to raise the minimum salary (currently $455/week) to $679 per week beginning January 1, 2020. If approved, this would raise the annual, minimum salary from$23,660,which has been in place since 2004, to$35,308 per year. Also increased would be the minimum, annual compensation for a “highly compensated employee” (i.e., an employee subject to a less stringent test for exemption) from the current $100,000 to $147,414. The proposed rule is subject to a sixty (60) day comment period following publication in the Federal Register, with the proposed final rule subject to review by the Office of Management and Budget. While there is no set timeline, the current expectation is that the final rule will be announced by the Fall.

If adopted, the proposed rule would replace the regulations issued in May 2016 setting a weekly salary of $913/week ($47,476/year), with, among other things, updates every three years. That rule was struck down by a Texas federal court in August 2017. The proposed new rule seeks to avoid the flaws found by the federal court and follows the USDOL’s receipt of comments from 6 in-person listening sessions and review of over 200,000 comments submitting in response to a 2017 Request for Information. Interestingly, the proposed rule retains from the 2016 rule, a provision allowing employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level. Allowing employers to make up the minimum salary through such bonuses and payments was new in 2016, although the proposed rule would change the maximum “true up” period from quarterly to annually.

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